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Buying a Flat in Barcelona Barcelona has the habit of gripping on and not letting go and if you’ve been here for a while you might be putting out tentative feelers in the direction of the property market. Although prices are high, the laws of gravity dictate that what goes up must come down, and you might just find that buying a property works out cheaper than renting. If that first step towards buying your first home confounds you completely, you’ve come to the right page. Flat viewing
It is important to go and visit as many flats as possible within the price range you have selected. There are two ways of doing this. Firstly, you can visit an estate agent. Normally Spanish speaking, the estate agent will show you a selection of flats within your price range (almost always displayed in the front window with a photograph), that you can also visit. The second method is to pay attention to the little pieces of paper stuck on lamp posts advertising private sales. You can telephone the seller directly and arrange to go and visit the flat. The advantage of a private sale is that the estate agent does not take its own cut, normally 5% of the final cost. The disadvantage is that all negotiations are carried out directly between the buyer and the seller which can be stressful and sometimes unpleasant. Putting down a deposit
When you have decided upon a flat make sure you visit twice as first time opinions can be deceptive. The next stage is to put down a deposit (Paga Señal) on the flat. If you go through an estate agent, a deposit constitutes about 5% of the total value; if your flat is worth €190.000 the deposit would be around 9.500€. Once the deposit has been paid, the Estate agent will give you a contract (Contrato de Arras) and reserve the flat for a specified amount of time, between one and three months. In this time period, you must secure a mortgage and if you are unable to do this you will lose the deposit. Some mortgages give 100% financing which means that you do not have to put down a deposit from your own savings. Some banks, however, will only give 80% of the total property value as a mortgage loan.
Getting a mortgage
So far so good, next comes the hard part – getting a mortgage. Normally the estate agent will look around to find you the best mortgage loan offer. If it is a private sale, or if you have special circumstances – such as being foreign, you might have to make the mortgage arrangements yourself. This involves visiting banks and requesting a mortgage loan. Every bank gives different interest rates on mortgage repayments and it is worth shopping around as it can make a big difference on your monthly repayments. There are two figures that are important. Firstly, the TAE which is the initial interest rate for the first six months. A good TAE rate would be 2.5%. The most important figure, however, is the interest rate after the first six months. This consists of the Euribor, which is the set European interest rate that changes every year and has been roughly 2% for the last three years, and the individual bank’s interest rate, which can be anything from 0.49% to 0.75%. A good interest rate would be Euribor + 0.49% (2.49%). Many banks offer excellent TAE rates but high individual rates that only come into effect after the first six months. You might also find that bank managers do not explain clearly what each interest rate means.
Mortgage eligibility – risk assessment
To assess whether you are legible for a mortgage, the bank will evaluate what level of risk you present. This process is called “Riesgos,” and normally takes between 7-14 days. It is a good idea to ask for a mortgage loan from a few banks at the same time so that if one bank rejects your request, there are others in the process of considering it. Remember, you only have limited time before your reservation contract runs out! To carry out the risk process, a bank will ask for the following things: a surveyor’s appraisal of the property in question (“tasamiento”: for a fee of €140 the bank or the estate agent’s will make the necessary arrangements); a full time employment contract or evidence of monthly earnings for a prolonged period of time (one year); details of all bank accounts in Spain and a signed statement testifying that you have no undeclared debts in Spain (this does not include information about other countries so if you have student loan repayments or outstanding debts abroad it is not necessary to declare them); NIE/NIF number and identification documents. Quite often if the bank considers that you present a high risk then they will grant you the mortgage on the basis that a guarantor also signs the mortgage loan contract. This means that if you or your partner can not make a mortgage repayment, the guarantor will be held responsible for said repayment. A guarantor must be a property owner and in full time employment. It will be necessary to present legal information about the guarantor’s earnings and identity to the bank. Foreign people might have a problem in this instance if their guarantor does not live in Spain as many banks will only accept Spanish residents as legible guarantors. One of the few banks that accept guarantors based outside of Spain is the Caja Mar. Signing the contract
Once you have been approved for a mortgage loan, the bank will set a date with the solicitor and the estate agent to sign the contract for both the property sale and the mortgage loan. On this day the buyer, the seller, the estate agent rep., the bank manager and the solicitor will be present. Be prepared for the seller to want to take a 5% share of the total price as “black money / en negro.” This is a common, albeit illegal, practice in which the full price quoted on the contract for the property sale is 5% less than the asking price, which is then given as a separate check to the seller so that they can avoid paying tax on this money. You will have a cheaper tax bracket if the property is legally owned by a Spanish resident and, therefore, it is worth considering carefully whose name appears in the property contract. We hope that this article has cleared up some of those doubts or shed a little light on the daunting process that has become the talk of the town for many citizens of Barcelona. Article by Genevieve Shaw, March 2006
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